a citizen’s journal by Thomas Nephew

Go ahead, gang up on Wal-Mart

Posted by Thomas Nephew on 25th August 2006

(…hat tips: L.A. Times, Lee Scott)

The Los Angeles Times may not use the word “Hezbocrats“, but they seem to share many of hired mudslinger Herman Cain’s basic premises in a Wednesday op-ed titled “Democrats’ Shameful Wal-Mart Demonization.” Shameful? Shameful!? Talk about Rovian “accuse them of what you deserve yourself” tactics!

In part, the Times reaches for the old “I’m warning you for your own good” ploy, in which the editorial board holds forth on the supposed primary vs. general election appeal of getting after Wal-Mart:

The gusto with which even moderate Democrats are bashing Wal-Mart is bound to backfire. Not only does it take the party back to the pre-Clinton era, when Democrats were perceived as reflexively anti-business, it manages to make Democrats seem like out-of-touch elitists to the millions of Americans who work and shop at Wal-Mart.

As Avedon Carol (“The Sideshow”) responds:

Right, because all businesses are exactly like Wal-Mart, objecting to Wal-Mart’s practices is ‘anti-business’. You could just as easily say the same about the Mafia – they are, after all, a business. But not all businesses are quite the same, and being against the Mafia, or loan sharks, or Wal-Mart, is not the same thing as being anti-business.

Moreover, if you’re actually a Democrat worried where Wal-Mart voters are trending, a Zogby poll recently found that 51% of frequent Wal-Mart shoppers agreed that it was “time for the Democrats to take over and run” Congress versus 31% percent who think “Republicans deserve to retain control” — after 85% support for Bush in the 2004 election.*

As Ms. Carol also noted, the editorial made another interesting assertion: “Most Americans do not want their politicians ganging up on one company.”


You know what? That’s actually not a bad idea — just do it through the Justice Department or its equivalents at the state level. In a Harper’s article “Breaking the Chain” (July, 2006), the New America Foundation’s Barry Lynn lays out “The antitrust case against Wal-Mart” — and it’s pretty compelling.

Summarizing, it turns out that what are essentially anti-trust cases aren’t confined either conceptually or by statute to attacking producer monopolies on behalf of the consumer. Seller “monopsonies” — a market form with one buyer — can be and have been taken to court as well. The grocery chain Atlantic & Pacific, for example, was taken to court from the 1940’s on, with one case concluding in 1979. Thus, statutes like the Sherman Act and the Robinson-Patman Act are also intended to protect suppliers from monopsonistic pressures to cut prices to levels demanded by 800 pound gorilla retailers like Wal-Mart.

As Lynn puts it, “Monopsony arises when a firm captures the ability to dictate price to its suppliers, because the suppliers have no real choice other than to deal with that buyer.” The classic treatment of monopsony considers labor markets,** but in this case Lynn is talking about Wal-Mart’s well known impact on its suppliers:

Kraft, meanwhile, is a producer that only four years ago was celebrated by Forbes for “leading the charge” in a “brutal industry.” Yet since 2004, Kraft has announced plans to shut thirty-nine plants, to let go 13,500 workers, and to eliminate a quarter of its products. Most reports blame soaring prices of energy and raw materials, but in a truly free market Kraft could have pushed at least some of these higher costs on to the consumer. This, however, is no longer possible. Even as costs rise, Wal-Mart and other discounters continue to demand that Kraft lower its prices further. Kraft has found itself with no other choice than to swallow the costs, and hence to tear itself to pieces.

Wal-Mart’s “Category Management” practices, whereby Wal-Mart allocates shares of its market — effectively the market — to the most compliant suppliers is an even more blatant example of the excessive market power Wal-Mart has. Effectively, Bentonville is midwifing captive monopolies:

These days, Wal-Mart and a growing number of other retailers ask a single supplier to serve as its “Category Captain” and to manage the shelving and marketing decisions for an entire family of products, say, dental care. Wal-Mart then requires all other producers of this class of products to cooperate with the new “Captain.” One obvious result is that a producer like Colgate-Palmolive will end up working intensely with firms it formerly competed with, such as Crest manufacturer P&G, to find the mix of products that will allow Wal-Mart to earn the most it can from its shelf space. If Wal-Mart discovers that a supplier promotes its own product at the expense of Wal-Mart’s revenue, the retailer may name a new captain in its stead.

An unwary consumer may applaud this in the short term, but in the long run the suppliers stocking the soft-drinks, dental care, shaving products, and other shelves and aisles controlled this way become essentially oligopoly-going-on-monopoly playthings of Wal-Mart; it can then dial those prices up or down more or less at will, yet dictate ever more onerous prices to its own suppliers.

As Lynn tells it, the seeds of Wal-Mart’s success were planted in the Reagan years as anti-trust activity was drastically curtailed (and, of course, as anti-union policies came into vogue). Far from being “elitist” or even anti-free market, then, taking on Wal-Mart would be a step in the right direction to a market that is more free, more fair, and better for more people than the current aberrant market system is. As Lynn concludes:

…We must restore antitrust law to its central role in protecting the economic rights, properties, and liberties of the American citizen, and first of all use that power to break Wal-Mart into pieces.

Lynn also finds a somewhat surprising voice of support (emphasis added):

As we make our case, we should be sure to call one expert witness in particular. Last year, Wal-Mart CEO Lee Scott called on the British government to take antitrust action against the U.K. grocery chain Tesco. Whenever a firm nears a 30 percent share of any market, Scott said, “there is a point where government is compelled to intervene.” Now, Wal-Mart has never been shy about using antitrust for its own purposes. In addition to the Toys R Us case, the firm was also the instigator of a Sherman Act suit against Visa and MasterCard. And so such a statement, by the CEO of a firm that already controls upward of 30 percent of many markets and has announced plans to more than double its sales, sets a new standard for hubris. It also sets a simple goal for us—elect representatives who will take Citizen Scott at his word.

I actually laughed when I read that. Who says economics has to be the dismal science?

* The link is to “Wal-Mart economics — and Wal-Mart Voters” in this blog; Zogby data via Ryan Sager (“RealClearPolitics”) are cited there.
** Wal-Mart also effectively undermines free-market wage levels, in my opinion, via the combination of its size crowding out competing retailers, anti-union tactics, and time shaving. This may amount to a labor monopsony as well, but since Lynn isn’t arguing that point, I won’t either.

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Wal-Mart opponents "Hezbocrats"

Posted by Thomas Nephew on 23rd August 2006

“Working Families for Wal-Mart” board member and columnist Herman Cain is labeling Democrats speaking out against Wal-Mart’s business practices “Hezbocrats.” It’s no throwaway line, either. Cain thinks he’s hit a rhetorical home run, using it in the column’s title, and leading paragraph after paragraph with the term — and naming names you might not expect. From “Hezbocrats Attack Wal-Mart“:

Leading Hezbocrats, including Sen. Joe Biden (D-DE), Sen. Evan Bayh (D-IN) and Gov. Bill Richardson (D-NM), attended rallies in Des Moines to slam Wal-Mart, the nation’s largest private employer. Wal-Mart’s crime? According to the Hezbocrats, Wal-Mart has abandoned the middle class by not paying what they consider a “living wage” or providing its employees free healthcare coverage.

At one rally, Sen. Biden stated, “My problem with Wal-Mart is that I don’t see any indication that they care about the fate of middle-class people.” Sen. Bayh added, “Wal-Mart has become emblematic of the anxiety around the country, and the middle-class squeeze.”

The rallies were organized by Wake Up and Wal-Mart Watch; I hope readers will support Wake Up Wal-Mart’s demand for an apology.

Meanwhile, it’s gratifying to see skepticism about Wal-Mart hit the mainstream to this extent; the signature moment was when Joe Lieberman and Ned Lamont showed up at the same WakeUpWalMart rally in Connecticut early this month. But pace Bayh, there’s nothing merely “emblematic” about Wal-Mart. The company is exerting a gigantic, Jupiter-like gravitational pull downwards on American wages and health benefits, and resisting that is what Democratic politics should be all about. It’s telling that should be met with puerile name-calling.

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Wal-Mart: No careers here

Posted by Thomas Nephew on 9th August 2006

I lifted that headline from, which noted on Monday:

…Wal-Mart just announced to its workers that the long-term associates will never get another raise again, not even a penny.

But, the most disturbing part, is that Wal-Mart coupled this cruel announcement with what would have otherwise been a good thing by slightly raising the starting salary of its employees (and they probably thought they were going to get away with it).

So, if you are a Wal-Mart employee here’s the message you just got: Do not apply here if you want a career, and if you have worked here for awhile, please leave because you cost us too much.

A related story illustrates the personal impact of that message. Touring in Ohio, a WakeUpWalMart bus passenger was approached by a man who “told us his wife had come home crying today from work”:

Guess where she worked? You guessed it, Wal-Mart. And, she had just had her in-store meeting to learn that she is now capped out and will never get a raise working at Wal-Mart again. The woman was literally in tears and her husband had come over to the diner to get her some food so she wouldn’t have to cook dinner after such a long day.

WakeUpWalMart director Paul Blank comments:

Like most of Wal-Mart’s recent publicity stunts, the company takes one step forward and two cruel steps backwards. Here is what Wal-Mart is really doing: cutting wage increases, imposing salary caps for workers who already get paid poverty-level wages, and shifting hundreds of thousands of full-time workers to low pay, part-time jobs. Wal-Mart should be ashamed of itself.

Instead of doing what is right and raising the salaries of its employees, so they can live above poverty, Wal-Mart has coupled this so-called ‘salary change’ with a salary cap on long-term workers that will not only destroy employee morale, hurt Wal-Mart workers’ families, but will force many long-term associates to leave the company.

I had hoped that Maryland’s Fair Share Health Care bill* could have had the effect of encouraging Wal-Mart to move to more full-time employment. Conversely, we may have just seen the RILA v. Fielder ruling striking down that bill (however incorrectly, in my opinion) having the opposite effect: the continued marginalization and, frankly, exploitation and oppression of the Wal-Mart workforce — a huge group in its own right, and a bellwether for the rest of the American economy.

Along with the freeloading as business model I object to so strongly, Wal-Mart’s modus operandi has been to sail into relatively weak rural or urban economies, stamp out the competition, and then hire the conquered as part-time workers on sufferance. Doing that with the help of taxpayer health care subsidies is, as John Edwards puts it, a “double whammy.”

Fair Share Health Care was about much more than health care; it was also about what kind of corporate citizens we intend to put up with in this state and in this country. And it wasn’t just about Wal-Mart: either companies like it change their ways, or their competitors will have to emulate their practices to avoid going out of business.

I strongly urge Maryland legislators and candidates, such as those participating in my recent online forum about Fair Share after RILA v. Fielder, to plan specific legislation to restore “Fair Share Health Care” and otherwise constrain corporate behavior against low-income wage earners.

I respect and support the goal of universal access to health care, which is what most of those candidates preferred to discuss. But the most fundamental source of good health care will always be good jobs — whether those jobs pay for it with payroll deductions, copayments, or income taxes. While it was certainly no panacea, “Fair Share” was a step in that direction. Whether or not “Fair Share” can ultimately be restored, we need policies ensuring our state and our country will have a full time economy, not a part time one.

* A Maryland law requiring companies to choose between paying at least 8% of payroll into health benefits, or paying the shortfall to a state Medicaid fund. The law was recently overturned in federal court as incompatible with federal health benefits legislation known as ERISA.
EDIT, 8/10: bus tour was also WakeUpWalMart, not WalMartWatch.

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Democratic District 20 candidates on Fair Share Health Care

Posted by Thomas Nephew on 29th July 2006

As I mentioned on Tuesday, I asked Democratic District 20 candidates to comment on the recent RILA v. Fielder ruling overturning Maryland’s Fair Share Health Care law. The substantive part of my Monday e-mail was as follows:

Dear Democratic District 20 candidates,

As you probably know, a federal judge overturned Maryland’s Fair Share Health Care (FSHC) Act last week. (I posted an item about this decision as “RILA v. Fielder strikes down Fair Share Health Care.”) Colloquially if inaccurately referred to as the “Wal-Mart bill,” FSHC required companies with over 10,000 employees to pay an amount equal to at least 8% of payroll to health benefits, or pay the balance into a state Medicaid fund. As I understand the ruling, the judge found this to be incompatible with the federal Employment Retirement Income Security Act (ERISA), but not a violation of the principle of equal protection for Wal-Mart vs. other companies. The decision will be appealed, but the prospects for success are uncertain.

My question to all of you is:

Assuming the RILA v. Fielder decision stands, what specific legislative steps do you support — if any — to pass a FSHC or similar measure that would withstand judicial scrutiny? By “similar”, I mean measures that address the needs of low-income wage earners with inadequate health care benefits, and/or the “free rider” problem of companies like Wal-Mart which — despite being highly profitable — essentially rely on state Medicaid systems to provide health care for their employees.

I then discussed suggested word limits and formatting,* and asked for responses by this evening. Here are the Assembly and Senate candidate responses I received by this evening, in the order I received them.

Maryland District 20
— Assembly candidates —

Delegate Gareth Murray

As you are aware, I was a strong advocate and voted for the Fair Share Health Care bill and view it as another step toward providing the Maryland workforce the rights and benefits they so richly deserve. I wish this were a problem for which I could give you a quick answer. Unfortunately this is a very complex issue which I do intend on addressing upon my return to Annapolis. The task is to craft legislation that will promote certain behaviors in reference to provision of healthcare by prohibiting or at a minimum removing economic incentive to do otherwise. Given the time required to adequately research and draft such a proposal, I do not have the time during this campaign for re-election.

Lucinda Lessley

It is my understanding that the Wal Mart bill was struck down because it was found to be in violation of the Employee Retirement Income Security Act (ERISA), which essentially creates a federal statute to occupy the regulation of health and benefit plans in order to ensure that firms that employ people in multiple states can maintain a standard, nationwide package of benefits.

I supported the aim of the Wal Mart bill which was to require that Wal Mart either provide health insurance to its employees or pay the State to provide the benefits that many employees obtained through State programs. If it would be possible to craft a bill that meets these objectives without violating the provisions of ERISA, I would support it.

The better way to avoid the problems faced by the Wal Mart bill, however, and to ensure that all Marylanders have access to health care, is to create a system in our State that provides universal care or coverage. While such a system may be a single payer system or it may be a system such as was adopted in Massachusetts that requires all citizens to carry health insurance (and subsidizes coverage for those who cannot afford it), I believe it is shameful that some 700,000 Marylanders lack health insurance. A state with the resources that are available to Maryland can provide universal coverage if such coverage is made a top Statewide priority; if elected, I will work to make universal care this kind of priority.

Diane Nixon

I supported the Wal-Mart bill, and I am sorry that it was struck down. But I thought of it as a stepping stone, not a solution to the health care crisis in Maryland. Since it only applied to employers who have over 10,000 employees, few residents in Maryland would have been affected. I want legislation which will provide universal coverage to all residents, modeled after the bill which passed in Massachusetts this year. Uninsured residents who can afford to buy insurance must buy it or face tax penalties. Businesses with more than ten workers must provide insurance or they will be fined. People below the federal poverty level will be provided with health insurance, without paying premiums or deductibles. Lower income people will be able to buy subsidized policies. The Massachusetts plan reduces the cost of health insurance for people who are already insured. Having fewer people without insurance will lower costs for employers. Adding healthy people, who use less health care, will keep deductibles and premiums down. The cost of health care is too expensive and it getting worse. Massachusetts legislators have shown that providing health insurance to the uninsured is possible. Since this is a new plan, it will probably undergo several changes before it works for everyone. But it does what the Wal-Mart bill failed to do. It comes close to providing universal health care, it makes most businesses responsible for covering their employees, and it offers hope that the broken health care system can be fixed.

Aaron Klein

As a nation, the United States spends almost twice as much as every other industrialized country on health care and yet we have little to show for it – with higher infant mortality and lower life expectancy rates. Maryland’s teen pregnancy rate is greater than both Kentucky’s and Oklahoma’s. Our health care system is broken. We need comprehensive reform to address the fundamental problem—that more than 800,000 Marylanders lack health insurance. While I support interim efforts like the so-called “Walmart Bill,” which force companies to pay their fair share, the longer term solution lies in a fundamental shift away from the link between employment and health care and toward a universal system. The states of Massachusetts and Hawaii have made notable progress in that regard and Maryland ought to consider moving in that direction. Universal state-funded health care would also help our economy as rising health care costs have a devastating impact upon not only working families, but also small business owners. We need to focus our efforts on making health care affordable for everyone and on helping to promote small and local businesses, which means both providing health care to their employees and making sure that the large companies who try to avoid paying their fair share are held accountable.

Maryland District 20
— Senate candidates —

Jamie Raskin

Background: The federal district court in Maryland struck down the Fair Share Act (Wal-Mart bill) because the law was clearly preempted by the federal Employee Retirement Income Security Act of 1974 (ERISA), which was designed to preempt state regulation of benefit plans.

Here are two possible solutions for Maryland:
1. Support a union organizing drive at Wal-Mart and other big companies to give the workers leverage to negotiate for better health benefits.
2. Pass a comprehensive, statewide universal health insurance plan, which will, in any case, be far superior to the Wal-Mart bill. After all, the Wal-Mart bill did not get health coverage for any of the 800,000 uninsured people in the state and arbitrarily fixed an 8% health spending share (why not 9%, 12% or 7.8%?) for these big companies.

Judge Motz observed that the recently passed Massachusetts universal health plan, in contrast, did not conflict with ERISA because it “addresses health care issues comprehensively and in a manner that arguably has only incidental effects upon ERISA plans.” It is clear now that we need creative and legally-expert new leadership to make universal health care for Maryland a priority and a reality.

State Senator Ida Ruben

I am hopeful that the Attorney General’s appeal of Judge Motz’s decision on the Fair Share Health Care Act will be overturned. If however, the appeal is unsuccessful, then I will work closely with the Attorney General on constitutionally acceptable legislation and I will introduce such legislation in the next Session.

More than any other employer, Wal-Mart shifts its health care costs onto taxpayers. In fact, as reported in the New York Times (10/26/05), Susan Chambers, Wal-Mart Executive Vice President for Benefits, for the Wal-Mart Board of Directors, said: “[O]ur critics are correct in some of their observations. Specifically, our coverage is expensive for low-income families, and Wal-Mart has a significant percentage of associates and their children on public assistance.”

As a nation and as a state must do more to ensure that all of our citizens have access to affordable health care. It is critical that large corporations do their fair share for their employees.

This year I supported legislation that created the Joint Legislative Task Force on Universal Access to Quality and Affordable Health Care. This Task Force will examine what Maryland can and should be doing to reform health care. Recently Massachusetts voted to approve legislation that will extend health care coverage to thousands of residents.

As President Pro Tem of the Senate, ensuring that Maryland residents have the best possible healthcare is one of my top priorities. I will continue to work with my colleagues to find innovative solutions for our families.

I sincerely thank all these candidates for their responses, and for being willing to discuss this issue in this format. I’ll add any additional candidate responses through Wednesday evening in an “UPDATE” section below, and thank them in advance as well. All candidates, their supporters, and everyone else can also leave comments by clicking the “[#] comment[s]” link at the bottom of this post.

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Poor widdle Wal-Mart

Posted by Thomas Nephew on 25th July 2006

Once again, the Washington Post takes the beleaguered behemoth of Bentonville under its motherly wing with the Monday editorial “Spare Goliath,” subtitled “Maryland’s “Wal-Mart law” is a bad idea that doesn’t deserve a second chance.” The editorial notes that Maryland Senate leader Mike Miller wants to reintroduce Fair Share Health Care legislation next session, in the wake of the RILA v. Fielder ruling overturning this year’s legislation, and argues:

…even if Mr. Miller could find a way to draft a legally viable version of the law, he still shouldn’t reintroduce the measure.

Targeting a single company because it’s unpopular — or, as Mr. Miller implied, because it’s buying political protection with “contributions to the Republican Party” — is a misuse of governmental power. […] About 800,000 Marylanders don’t have health insurance, and most of them don’t work at Wal-Mart. Massachusetts, a state that is trying to responsibly address rising health-care costs, hasn’t resorted to preying selectively on its large employers. Neither should Maryland.

While I wrote about it last week, I don’t pretend to be an authority on the RILA v. Fielder ruling overturning the Fair Share Health Care Act. But as far as I can tell, the “singling out” objection seems to be an argument the judge actually rejected in his ruling:

…legislatures are permitted the “leeway to approach a perceived problem incrementally.” […]

… It is only in cases involving politically vulnerable groups that the Supreme Court has appeared to rely, at least in part, on legislative antipathy when invalidating a law under the rational basis test.

The Post has opposed the Fair Share Health Care bill all along, so nuts to them. But to respond in brief, Fair Share Health Care is (or was) just that: as much about fairness to other businesses — and thus some kind of halfway decent health care floor for all employed Marylanders — as it was about Wal-Mart in particular. Wal-Mart’s business practices (and those of companies emulating it) are the ebbing tide that lowers all boats when it comes to health care plans. As the CEO of Giant Foods — presumably no wild-eyed radical — said in 2003:

All we ask for, and what we need, is a ‘level playing field’ where every employer pays their fair share, and where a company’s competitive advantage is achieved by means other than avoiding the provision of medical care coverage and shifting the costs towards those companies who do provide that coverage.

It’s true that in a better world, we’d have universal health care, paid for by a fair, progressive tax structure. But in the meantime, what we have is employer-based health care — and Wal-Mart is getting away with fobbing off its workers’ health costs on the rest of us while it makes billions of dollars.

A recent Washington Post poll found that 77% of Marylanders supported the Fair Share Health Care act. Like them, I think this was a good measure and is an important issue — important enough that I’ve asked the Democratic candidates for District 20 Assembly and Senate seats for their views on what should come next if the RILA v. Fielder ruling stands. I hope to have some responses collected by Friday evening.

Meanwhile, check out this great bit of Wal-Mart activism by Kris Hall in Maine: Wal-Mart walking tour podcasts; story here, via “Sandwichman” at “MaxSpeak, You Listen.”

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RILA v. Fielder strikes down Fair Share Health Care

Posted by Thomas Nephew on 20th July 2006

The Washington Post’s Matthew Mosk and Yian Q. Mui report (‘Wal-Mart Law’ in Md. Rejected By Court) that federal district judge J. Frederick Motz has struck down the Fair Share Health Care bill passed earlier this year, ruling it conflicts with a federal law setting national guidelines for employee benefits. The Fair Share bill required Maryland companies with over 10,000 employees to pay a minimum of 8% of payroll to health care benefits, or make up the difference with payments to a state Medicaid fund.

In his RILA v. Fielder ruling, Judge Motz agreed with the Retail Industry Leaders Association that the Fair Share Health Care act was incompatible with ERISA (the Employment Retirement Income Security Act). Mosk and Mui report:

The Maryland law, Motz wrote, “violates ERISA’s fundamental purpose of permitting multi-state employers to maintain nationwide health and welfare plans, providing uniform nationwide benefits and permitting uniform national administration.”

Maryland lawmakers had been relying on an advisory opinion signed by Attorney General J. Joseph Curran Jr. (D) that listed a series of recent Supreme Court opinions, which, he argued, gave Maryland the latitude to impose the restrictions on Wal-Mart.

Motz, however, said his reading of the cases was different. “My finding that the Act is preempted is in accordance with long established Supreme Court law that state laws which impose employee health or welfare mandates on employers are invalid,” the judge wrote.

Prior to the bill’s veto override vote, at least one expert disagreed with this view of Supreme Court rulings on the matter. The Maryland Gazette reported that George Washington University law professor Phyllis Borzi believed that “since a 1995 decision, the Supreme Court has given states more control in regulating employee benefits.” The Baltimore Sun reported that Attorney General Joseph Curran agreed, “arguing that the Maryland law did not conflict with federal rules because it does not force employers to provide a specific level of health benefits. Rather, it gave companies the option of spending a certain amount on health care or paying a tax to the state.”

While that may seem like a distinction without a difference at first, I should think just paying a tax or fee to the state is operationally a very different (and simpler) choice than going to the trouble of arranging a competitive health care plan of one’s own. Be that as it may, it appears to me from inexpertly skimming the ruling that Motz’s key argument is

A short description of the statutes involved in Travelers, DeBuono, and Dillingham is sufficient to demonstrate that they lie at the periphery of ERISA analysis, not (as does the Fair Share Act) at its core.

… so that he believes these Travelers etc. rulings do not open the way for states to be health policy “laboratories of democracy” regarding health benefits policy. Some of Motz’s arguments appear odd to me; for example, he seems to argue at length that the bill is either a tax or a fee (I think he settles on regulatory fee) — but soon thereafter asserts that “the General Assembly neither intended nor contemplated that Act would raise any revenue for the State” (since it was assumed companies would prefer to raise their health care expenditures to the 8% threshold). I hope lawyers such as Nathan Newman or publius will illuminate these arguments better than I can.

The Washington Post article reports that the law is overwhelmingly popular in Maryland, with 77% of respondents to one survey favoring it. Maryland legislators and the current Attorney General Joseph Curran appear resolved to appeal the RILA v. Fielder ruling, and AG candidate Tom Perez has expressed his strong support for the bill as well:

It is quite clear to me that the intent of this legislation was to demand action by all large, private-sector employers in our State to develop or maintain health benefits’ programs for as many employees as possible. There are many chapters left in the legal battle; we will prevail because this legislation is both legally and morally sound.

Motz’s ruling did find against RILA in one respect: the Fair Share bill did not violate equal protection guarantees by “singling out” Wal-Mart. From the ruling:

The Supreme Court has made it clear that “equal protection is not a license for courts to judge the wisdom, fairness, or logic of legislative choices.” … A necessary corollary of this principle is that legislatures are permitted the “leeway to approach a perceived problem incrementally.” […]

…unless there is a reason to “infer antipathy” from the targeting of a particular group or person, “[t]he Constitution presumes that . . . even improvident decisions will eventually be rectified by the democratic process and that judicial intervention is generally unwarranted no matter how unwisely we may think a political branch has acted.” … It is only in cases involving politically vulnerable groups that the Supreme Court has appeared to rely, at least in part, on legislative antipathy when invalidating a law under the rational basis test.

But beyond that silver lining — such as it is — this is obviously a setback for the Fair Share idea, and one I hope is overturned as soon as possible.

UPDATE, 7/20: a Progressive States Network bulletin comments that the Fair Share defeat may well be reversed, and in any event has little to no bearing on other approaches to the Wal-Mart issue, e.g., prevailing wage or “big box” laws. The article makes the same point I do about “singling out” not being grounds for overturning the law. Thanks, eRobin!

UPDATE, 7/25: Labor law professor Paul Secunda (“Workplace Prof Blog”) identifies the same key passage re ERISA and comments, “…is the Maryland law really focused on ERISA plans? Some would argue that the law does not directly interfere with Wal-Mart’s health care plan, but only requires it to spend a given amount of money on health care regardless of whether it has such a plan or not. My sense is that this dispute lies at the heart of this controversy over Fair Share laws.”

EDIT, 7/29: New ERISA link directly to the statute’s language, rather than to a DOL overview.

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Wal-Mart economics — and Wal-Mart voters

Posted by Thomas Nephew on 3rd July 2006

Slate has been running a fascinating debate between Barbara Ehrenreich and Jason Furman under the heading “Is Wal-Mart Good For America?” As Ehrenreich points out, it’s an odd pairing: she’s an activist and author who went ‘undercover’ to document what it’s like to work for Wal-Mart, he’s a liberal economist perhaps best known for his arguments that Wal-Mart is, indeed, good for America, and in fact particularly for the poorest Americans.

Furman’s arguments center, as they must, on the huge productivity gains due to the Wal-Mart business model, and the payouts in cheaper goods particularly for low-income Americans. In making these arguments, he ignores, as he must, that even greater productivity gains could come by simply enslaving Wal-Mart clerks and selling the tube socks they stock for a quarter and the TV sets they move from warehouse to storeroom for a buck and a half. This isn’t possible, of course — but the reason lies outside Furman’s core competence of economics, in the precise rock-bottom labor conditions Americans are politically willing to countenance.

The issue with Wal-Mart, to me, is that they have found a way to game American politics and policy by outsourcing health care costs and even living wage costs to the rest of the country by running a full-time, powerful megabusiness on part-time, powerless labor inputs. The vaunted national “productivity” gains resulting from Wal-Mart’s business model are an Enron-like accounting scam. Those gains are achieved by squashing their own labor costs and those of suppliers with both taxpayer help and illegal union-busting methods. Thus, I would argue that Wal-Mart’s economic success is in part a mirage resting on a labor market failure abetted by the NLRB, and on political failures that states like Maryland, unwilling to foot substantial health care costs by themselves any longer, are finally addressing with “Fair Share Health Care” bills.*

For her part, Ehrenreich concludes:

What is it that we really differ over? We both want higher wages and more generous government social programs; we both voted for Kerry; we’re both in the upper-middle class or pretty close. The difference, I think, lies in our mental ZIP codes. Where you see some unfortunate, but not really all that bad, numbers, I see human crises, and I see them in my extended family and my network of friends as well as in the letters I get from readers: The car that gets you to work breaks down and is going to cost $200 to repair. The baby gets sick so you miss a day’s work and face the possibility of losing your job. Your back goes out and you can’t scurry around the floor picking up tossed merchandise any more.

You’re screwed, in short, and, until we all pull together and fight like hell for a better deal, there’s no help coming.

This seemed to finally get Furman’s goat. Unable after all to let his prior response be his last, he responds (in part):

So, you want to go further to pressure Wal-Mart to raise wages and benefits, to make it a better company? If that’s all it was about, count me in. But the principal methods are preventing the spread of Wal-Mart’s benefits to new communities (like my hometown, New York City), living wages at $15 an hour, retail-specific minimum wage rules like Chicago’s and Maryland’s pay-for-play that target a single company that already provides decent health benefits.

The collateral damage from these efforts to get Wal-Mart to raise its wages and benefits is way too enormous and damaging to working people and the economy more broadly for me to sit by idly and sing “Kum-Ba-Ya” in the interests of progressive harmony. Not to mention the collateral damage to rational thought from many of the arguments made by the anti-Wal-Mart community, including the arguments I noted in my last post that undermine food stamps and the progressive taxation.

Pretty warm exit strategy there: condescending “Kum-Ba-Ya” remark — check! Opponents incapable/unwilling to engage in rational thought — check! And of course, sliding in a “decent health benefits” assertion that is all too easily refuted — there’s nothing decent about health benefits with the kind of huge deductibles Wal-Mart requires of its low pay workers.

Even were the market always right, there’s still reason to think Furman is wrong. That’s because even Wal-Mart shoppers — the purported beneficiaries of Wal-Mart’s methods — are not as on board with the country’s direction as you’d think they would be if the low, low price of underwear were the only thing on their minds. Writing at the blog “RealClearPolitics,” Ryan Sager describes the rise and possible fall of one element of Republican voting strength of the past years — “Wal-Mart voters“:

What’s Wal-Mart got to do with anything? Not a whole lot, except as a symbol of a particular type of voter: largely Southern, rural, lower-middle-class, female, socially conservative — not big fans of tax cuts, but huge fans of government programs.

Outsourcing health care to state Medicaid systems, unionbusting, and strip mining rural economies may be about to bite Wal-Mart and its political patrons right where it hurts. The shift in attitudes among these voters over the last several years has been nothing short of seismic:

Zogby finds that while 85 percent of frequent Wal-Mart shoppers voted for President Bush’s reelection in 2004 (and 88 percent of people who never shop there voted for Sen. John Kerry), Wal-Mart voters have turned on the president dramatically. In a poll taken earlier this month, they gave Bush a 35 percent approval rating — compared to a 45 percent positive rating from born-again Christians, 49 percent from NASCAR fans, and 54 percent from self-identified conservatives.

Most worrying for the GOP: Fifty-one percent of Wal-Mart voters agreed with the statement that it’s “time for the Democrats to take over and run” Congress — as opposed to just 31 percent who think “Republicans deserve to retain control.”

Assuming not all of this shift is due to closely observing Bush’s signing statements or the upsurge in Shia-Sunni tensions in Iraq, I’m guessing there’s also a bit of dissatisfaction there with this, the greatest of all possible economies. I’ll close this post by noting this dovetails nicely with observations — well, hopes — I expressed after the 2004 election, in “The road back — take on Wal-Mart“:

Wal-Mart is not just a deserving political target, but a useful one over the next four years: it was spawned in “Red State,” rural territory, and its roots remain there. To the extent Democrats and union organizers can succeed in bettering the lot of Wal-Mart workers, they will have found allies across the country, in precisely the areas Democrats need support, among precisely the working people from whom they need to earn it.

Maybe they haven’t succeeded yet with bettering the lot of Wal-Mart workers, but it seems like a lot of Wal-Mart shoppers are willing to give them a chance.

* Maryland’s Fair Share Health Care measure calls for businesses with over 10,000 employees to either pay at least 8% of payroll to health benefits, or make up the difference with payments to a dedicated state Medicaid account.
NOTE: Sager article via Steve Benen (“The Carpetbagger Report”).

UPDATE, 7/5: Reader WorldWideWeber points out an excellent London Review of Books article about Wal-Mart, “The Price of Pickles,” by John Lanchester. But see also Jason Furman’s Wal-Mart: A Progressive Success Story to recognize again that Furman is also concerned about shortcomings of the American economy; in his view, though, singling out Wal-Mart is counterproductive.

UPDATE, 7/11: Forgot to mention I crossposted this to Daily Kos — and forgot to check back in until now. Good news: 31 comments! Bad news: many of them about Barbara Ehrenreich voting for Nader back in 2000. But not all of them are about that; at any rate, the post was recommended by quite a few people, so maybe it was also read by a lot of people.

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Fair Share-type bill advances in Minnesota

Posted by Thomas Nephew on 20th March 2006

The Minneapolis Star Tribune’s Mark Brunswick reported last Monday (“Senate unit approves ‘Wal-Mart’ health care bill“):

A bill that would require the state’s largest employers to pay health care insurance costs for their workers — commonly known as ‘the Wal-Mart bill’ — passed a Senate committee on Monday, amid concerns from groups such as the Chamber of Commerce that it would stifle job growth and do nothing to address skyrocketing health care costs.

The bill would cover only the handful of Minnesota firms with 10,000 or more employees. It would require those companies to spend on health benefits an amount equal to 8 percent of the wages it pays to its lower paid workers, or pay the difference to a state fund.

The measure, SF2672, is described prosaically and accurately as “Large employer health cost payments” by the Minnesota Senate web site. As the article points out, the provisions mirror those of the “Fair Share” bill passed recently in Maryland. Principal sponsor State Senator Becky Lourey testified that she is trying to “stop the cost shifting to the public programs.”

Ms. Lourey is also running for governor of Minnesota, although a February Rasmussen Report poll implies that she trails at least two other Democrats (State Senator Steve Kelly and Attorney General Mike Hatch) in the race to oppose Republican governor Tim Pawlenty.

Unfortunately, her “large employer health cost payments” measure also seems to face an uphill battle. The Star Tribune article says the Minnesota bill “faces an uncertain future. A similar measure failed in a House committee last week.”

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Retailers sue Maryland over Fair Share Health Care law

Posted by Thomas Nephew on 8th February 2006

A retail industry association is suing Maryland to overturn the Fair Share Health Care Act, which requires companies with over 10,000 employees to pay at least 8% of payroll in health benefits to workers and/or to a state Medicaid fund. Douglas Tallman of the Montgomery County Gazette reports:

In its U.S. District Court suit, the Retail Industry Leaders Association claims the law violates the Employee Retirement Income Security Act, or ERISA, a 1974 federal law that leaves all regulation of health benefits to Congress.

Tallman adds that RILA is also claiming that the Maryland law violates the equal protection clause of the U.S. Constitution because it allegedly singles out one company (Wal-Mart) for arbitrary treatment.

As noted here at the time, the ERISA argument was also made by the Maryland Chamber of Commerce the week of the January veto override that made the bill law. Legal experts including the Maryland State Attorney General considered the claim weak. In its coverage of the suit, the Baltimore Sun noted:

Attorney General J. Joseph Curran Jr. issued his own advice letter last month, arguing that the Maryland law did not conflict with federal rules because it does not force employers to provide a specific level of health benefits. Rather, it gave companies the option of spending a certain amount on health care or paying a tax to the state.

A 1995 Supreme Court ruling explicitly gave states more discretion in this policy area vis-a-vis ERISA, as long as specific benefits weren’t prescribed.

The “singling out” charge has also been popular, though not usually dressed up as an equal protection issue. The argument seems nonsensical to me; the Fair Share bill doesn’t target Wal-Mart by name, but by its size, just as different laws and regulations are made to apply to large vehicles than to smaller ones. Developing…

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Harrumph of the Will

Posted by Thomas Nephew on 21st January 2006

On Thursday, columnist George Will took note of the Fair Share Health Care bill becoming Maryland law last week, and as his article’s title — Shoplifting as Governance –suggests, he didn’t like it, not one little bit. After one of his standard opening gambits — beguiling the gullible with a far-fetched historical analogy from the 18th century — Will sniffs:

Maryland’s grasping for Wal-Mart’s revenue opens a new chapter in the degeneracy of state governments that are eager to spend more money than they have the nerve to collect straightforwardly in taxes. Fortunately, as labor unions and allied rent-seekers in 30 or so other states contemplate mimicking Maryland, Wal-Mart can contemplate an advantage of federalism.

Continuing, Will warns darkly:

States engage in “entrepreneurial federalism,” competing to be especially attractive to businesses. A Wal-Mart distribution center, creating at least 800 jobs, that has been planned for Maryland could be located instead in more hospitable Delaware.

That’s right — you don’t want to get into a rent-seeking contest with those guys!


Were it the case that the Wal-Mart workers showing up on Medicaid client lists were seeking, say, cosmetic surgery or crystal therapy, Will might have a bit of a point. Even though by strict free marketeer standards, even such frivolities cannot be gainsaid those who desire them, Wal-Mart might rightly protest that they shouldn’t have to foot the bill.

If, on the other hand, those workers or their family members were seeking medical care that will enable them to work productively again, then Wal-Mart has been getting quite a good deal compared to the rest of the working world. While again, by strict “greed is good” standards, we cannot begrudge the worthy folk of Bentonville a good cry as their free ride comes to an end, neither can we quite hold it to be “shoplifting” by the Maryland legislature when they essentially require some co-payment for services rendered. Think of the 10,000 employees requirement as a “means test,” and think of throwing a “welfare queen” off the dole, and perhaps we’ve reformulated things more to Mr. Will’s liking.

Speaking of rent-seeking — the “bending of public power for private advantage,” by Will’s definition a week earlier — here’s a great example noticed by Arkansas Times Blogs. As it happens, it’s right in Wal-Mart’s back yard of Bentonville, Arkansas:

Morning News reports that Bentonville is forging ahead with creation of a giant (2.8-square-mile) Tax Increment Finance District so that school taxes can be siphoned off to provide infrastructure to serve such areas as the Wal-Mart world headquarters, a world-class art museum being built with Walton money and land Wal-Mart has acquired for future development. Blight fighters at work, subsidized by taxpayers all over Arkansas.

The Morning News article explains, “A tax increment financing district temporarily freezes the amount of tax revenue that goes to schools, counties and other entities that are taxing undeveloped or blighted property within the district.” Via Facing South, where Chris Kromm adds:

Nationwide, local governments have shoveled Wal-Mart over $1 billion in public money, according to a 2004 report from Good Jobs First.

If poor, blighted Bentonville knows what it must do to stay in its master’s good graces, we must not second-guess that decision. But proud Maryland is not yet so far gone, nor may she ever be. And, as Will points out, there may be be more states like her in in the months ahead — lawmakers in 30 states are reportedly preparing legislation similar to Maryland’s. “Shoplifting as Governance”? Hardly. Rather, the days of “Freeloading as Business Model” may be drawing to a close.

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